On January 1,Baker Co.purchased equipment for $100,000.It has an estimated useful life of five years and its residual value is $10,000.The company has a calendar year-end.Using the straight-line method,depreciation expense for the first year of its life equals:
A) $18,000.
B) $20,000.
C) $36,000.
D) $40,000.

Question

Quizplus · Accepted Answer

To calculate depreciation expense using the straight-line method, you need to subtract the residual value from the initial cost, and divide by the useful life.

($100,000 - $10,000) / 5 years = $18,000

So the answer is A) $18,000 for the first year of equipment's life.